Tata-Birla row over Idea goes for arbitration

10 July 2008

Mumbai: The Supreme Court has allowed a petition filed by the Tata Group seeking arbitration to resolve its two-year-old dispute with AV Birla Group firm Grasim Industries over the sale of its stake in telecom firm Idea Cellular.

The apex court also appointed a three-member arbitration panel comprising former Chief Justice AS Anand and two retired judges - Justice Arun Kumar and Justice PK Balasubramanyan.

The Tatas, in their plea seeking arbitration on the dispute, alleged that the Birla Group had violated the shareholders' agreement.

The dispute dates back to 2006 when the Tata Group was holding 48.14 per cent stake in Idea Cellular. Tatas were running another mobile venture – Tata Teleservices – and Birlas claimed that the former was not interested in the growth of Idea Cellular and sought government intervention in getting the Tatas to exit from Idea Cellular.

The Birla Group justifies its decision saying that as per the shareholders' agreement the founders were permitted to undertake independent mobile telephony business in new telecom service areas only if Idea was not in a position to launch such new business and if another JV was not possible.

Birlas in fact blame Tatas for violating the clause when the latter migrated from fixed line services to mobile services in 2003 by paying the licence fees.